Experiencing bankruptcy or liquidation is undoubtedly a challenging and uncertain time for individuals and businesses alike. When faced with financial distress, it’s essential to understand the legal processes, your rights, and the steps you can take to emerge from these situations with the best possible outcome. In this article, we will provide you with guidance on what to do if you find yourself in bankruptcy or liquidation.
Bankruptcy and liquidation are formal legal processes both designed to address insolvency:
Bankruptcy: Bankruptcy applies to individuals who cannot meet their financial obligations. When declared bankrupt, a trustee in bankruptcy is appointed to manage your affairs, and your assets including your home may be sold to repay creditors. You will be discharged from most of your debts. For individuals, bankruptcy can provide a fresh financial start albeit with the ability to, for example, obtain credit or a mortgage being considerably more difficult.
Liquidation: Liquidation refers to businesses. Liquidation can be voluntary or compulsory and is usually initiated either by a company’s directors or creditors when the company is insolvent. Following a winding up order a liquidator is appointed and will look at the financial position of the insolvent company and often take steps to recover outstanding liabilities owed to the company, either from the company’s debtors or in certain circumstances from the company directors or shareholders.
Seek Legal Advice: The very first step to take is to seek legal advice from a reputable law firm like Pinney Talfourd. Our expert insolvency lawyers can assess your situation, provide practical advice, and guide you through the steps that need to be taken.
Appointment of Insolvency Office Holder: following insolvency, an office holder (who is a specialist insolvency practitioner) is usually appointed to administer the insolvency process. In the case of bankruptcy, the office holder is a trustee in bankruptcy; in the case of liquidation of a company the office holder is the liquidator/s.
Assessment of Assets and Liabilities: In bankruptcy, your assets will be assessed to determine if they can be sold to repay your debts. In liquidation, the company’s assets are also assessed for the same purpose. It is essential to fully cooperate in this process.
Creditors’ Meetings: In both bankruptcy and liquidation, creditors will be invited to a meeting to discuss the situation and vote on any proposed arrangements. It is important to adhere to the decisions made during these meetings.
Compliance with Legal Requirements: In both bankruptcy and liquidation, it is critical to comply with legal requirements and obligations, including providing accurate financial information to the appointed office holder.
At Pinney Talfourd, our experienced insolvency lawyers are here to help you navigate the complexities of bankruptcy and liquidation. We offer expert legal advice tailored to your unique situation, ensuring you understand your rights and responsibilities. We can also assist in protecting certain assets that may be exempt from sale in bankruptcy.
We regularly work with some of the industry-leading insolvency practitioners and business recovery specialists and can, where appropriate, refer you to them for advice such as appointing a trustee in bankruptcy or a liquidator.
The above is meant to be only advice and is correct as of the time of posting. This article was written by Emma Hardie, CILEX Lawyer in the Commercial Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of October 2023.